Economy not as strong as the market

Posted by Don on June 11, 2009

Don’t believe the stock market.  We are up 34% from March.  There are multiple schools on what causes inflation, but while I don’t believe we may see consumer inflation anytime soon because of the underutilized capacity.

The economy isn’t as strong as everyone is making it out to be right now.  We lost another 600,000 jobs last week, which was below expectations and less than the prior week, but is still much worse than what we saw in 2000 during that recession.  We are entering Q2 which means comps against last years second quarter.  If anyone remembers we had stimulus checks sent out in Q2 of 2008.

I think the rally is slowing and we are falling into a trading range, but look for the November low of around 750 on the S&P to hold and probably the January low of 800 will hold as well.  Also the Relative Strength is diverging from the price action which means the rally is weakening.  As you can see from the chart below we have a possible inverse head and shoulders forming.  I think you can wait for a pullback to get long.  If you caught this rally take some profits and wait to buy back in.